SACRAMENTO, Calif.- The State of California has filed an appeal in the case that overturned a state law requiring personalized statements and call centers available during certain hours. The judge ruled in American Bankers Association v. Lockyer last year granting relief to the plaintiffs (lenders) from the legislation stating that California's law was preempted by federal banking laws, including the Federal Credit Union Act. CUNA and NAFCU were also parties to the lawsuit. In its appeal, California Attorney General Bill Lockyer argued that the legislation must be considered under the Truth in Lending Act, which allows for state laws that are consistent with it, and not the federal banking laws. TILA is most similar to the California law because it only applies to credit disclosures, whereas the federal banking laws cover numerous topics and lending is just one of them. The state also argued that the law can be divided into provisions and that the lower court should not have dismissed the entire law, he said. "Is the California Legislature unable to ensure that its residents are well-informed about the consequences of their credit card payment behavior because 94% of credit card receivables are held by federally-chartered entities? Are federally-chartered financial institutions immunized from complying with a simple state disclosure law that is not in direct conflict with any federal law or regulation simply because compliance will involve some expense to these institutions?" the appellants' brief asked. Lockyer also advocated that states have traditionally occupied the role of consumer protection. NAFCU Regulatory Compliance Counsel Eric Envall maintained that the original interpretation is most appropriate. Industry representatives also had complained that the law placed undue financial burden on them. "With the exception of the district court, no court has held that state law is preempted on the grounds that the bank must spend money or will earn less profit due to its compliance with the state law," Lockyer's appeal brief read. The industry representatives that brought the suit have until the end of July to file an appeal, though a specific date had not been set as of press time. Following that the state will reply, Envall explained, and then a hearing date is set. The lower court's ruling threw out a California law that would have required credit card companies to include a minimum payment warning explaining that paying only minimums will increase the length of time and amount of interest paid on a balance. It also required a three-line statement with three examples of the cost and length of time to pay off sample balances with minimum payments or similar individualized information. If a credit card lender chose the individualized warning, the lender would also have to send a written referral to a credit counseling service. The generic warning would have required lenders to provide a toll-free number for cardholders to obtain individualized information available between 8 a.m. and 9 p.m. Pacific Standard Time, seven days a week. For cardholders who made minimum payments for six consecutive months, the credit card issuer would also have to send a referral to a credit counseling service, as well as the individualized information. Credit card issuers requiring a 10% monthly minimum payment and those that do not impose monthly finance charges would be exempt from the law. -

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